A potentially bullish data point: All of this stuff eventually has to get replaced. The question is how much of this economic activity falls to the US economy; I’d guess well over 50%.

 

 

Source:
David Wilson
America’s Cars and Appliances Are Getting Old, December 13, 2012
Businessweek
http://www.businessweek.com/articles/2012-12-13/americas-cars-and-appliances-are-getting-old

Category: Digital Media, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

46 Responses to “America’s Cars and Appliances Are Getting Old”

  1. mathman says:

    not to mention the infrastructure:

    http://rt.com/usa/news/infrastructure-power-world-us-589/

    In the past years Americans have seen their levees fail leading to massive flooding and cracked bridges buckling, not to mention constant water main breaks and costly traffic congestion. In its report card of America’s infrastructure, The American Society of Civil Engineers gave the nation’s infrastructure a D grade and estimated $2.2 trillion over five years was needed to bring that up to a B.

  2. rd says:

    Keep in mind that cars have definitely gotten better of longevity over the past couple of decadses. Many now use galvanized steel and plastic for body parts, so vehicles that would be rusted out within 5-7 years now can still look almost new after 10.

    The Japanese focus on quality in the 1980s has also carried over to the other carmakers now from around the world, so the overall quality of design and manufacturing has improved significantly since the early 80s which is the inflection point for the graph.

    I can’t say the same level of improvement has occurred in applicances, furnishings etc. though.

  3. cswake says:

    ++ to rd, I’d love to see statistics on the long-term reliability of powertrains in passenger vehicles.

  4. donna says:

    If only we were paying young people enough to actually replace their cars… my twenty somethings are still driving late 90s and early 2000s hand me downs.

  5. rd says:

    cswake – keep in mind a number of manufacturers have gone to 5-10 year 60k-100k limited warranties on powertrains. That would have been unimaginable in the 70s-early 80s.

  6. Petey Wheatstraw says:

    Donna has hit on something. It’s not only the young, it’s the unemployed. Neither group will likely be buying new until they have stable employment.

    I have noticed more people working on their cars in my neighborhood, lately (something that last happened in the ’70s, prior to JiffyLube.

    The old American cars kept in running condition in Cuba are proof that the life of an automobile – even cheap ’50s American crap – can be extended, indefinitely, with some ingenuity and elbow grease.

    Even with the aging of the fleet, the future does not look bright for auto makers.

  7. Alan327 says:

    At moments like this I feel really out of step with American consumerism – my currently newest car is 11 years old (the others are older, but they are just for having fun), I have a 1 year old flat screen TV but after that my newest appliances are refrigerator and washing machine at 7 years old each. Only anecdotal, but I think the level of improvement in useful life in a lot of things is up vs. 30 or 40 years ago.

    It may be bad for the short-term economy, but I fail to understand the “4 years old so dump it” mentality, except for computers, mobile phones and cameras that are changing really fast. It hasn’t meant much directly for my investments, but it has added substantially to my rate of savings.

  8. Centurion 9.41 says:

    Data doesn’t lie, but the way liars present data does.

  9. riverrat says:

    I may be an outlier, but I will likely never buy a new car again. I drive a 2000 4runner, bought for no more than 1/3 it’s price new and with at least 2/3 of it’s useful life left. Americans, at least until recently, replaced their cars much more often than necessary, before it makes much sense economically, i.e. after they depreciate steeply but with a lot of useful life left. So there is a huge supply of nice used vehicles, which as noted are of overall better quality these days. The ongoing decline in middle class incomes suggests to me that more people will realize and take advantage of this.

    I agree that appliances may have more features but are not necessarily better built these days. I recently “fixed” the electronic readout in our range after it went on the fritz, by shimming it with a piece of cardboard. Cost to replace this part in an otherwise fully functional appliance would have been about 1/3 the cost of an entire new range. Who knows how long this lame fix will last- we may decide to buy a new range rather than replace an expensive part with an equally crummy one. But how many large appliances are actually made in the US these days?

  10. b_thunder says:

    “All of this stuff eventually has to get replaced” – true, but let’s not forget that HD and LOW P/E is 20, and WHR – 17, above their “natural” range (imo) Perhaps the “replacement cycle” news is already “old news?” It seems to me that at least these 3 stocks are rolling over.

    P.S. Since GM and Ally/ex-GMAC are getting back together, I do expect car sales to rise. Mostly due to the new wave of Fed-subsidized subprime/NINJA car loans.

  11. wmhalpin says:

    Could this also be driven by the population getting older?

  12. rd says:

    BTW – for the cars there is a distinct trendline to older cars starting in 1986. We are currently on that trendline. There was a jump of a full year from 1986 to 1996 with most of that happening in the 2nd Reagan term and 1st Bush term. It was largely flat during the Clinton era but has risen by about half a year since the start of the Bush II reign.

    I am surprised that it is simply following trend line since 2007 instead of a big jump above trend like occurred in 1986-1992. I think this is another case of media hype similar to the recent proclamations of the return of retails sales and exploding house sales.

    There is clearly a structural change to American car purchasing going back 25 years that is not seen in the other lines that are generally flat. It appears to be fairly well correlated to poor median income growth and growing income inequality over that period coupled with improving car quality. Who would have thought that reduced purchasing power would cause consumers to keep cars longer, especially if they last longer? Oddly enough, the periods where the GOP pushed tax cuts into place appear to coincide with lengthening car ages.

  13. danielweberdlc says:

    Wouldn’t it only be a ‘bullish’ thing if the money people were spending to replace these items was in -addition- to normal spending? If someone buys a new refrigerator with money they wanted to use on a vacation, for instance, then isn’t the net benefit to the economy zero, since it helps one company but hurts another? Correct me if I’m wrong, but isn’t this just the broken window fallacy in another form?

  14. Frilton Miedman says:

    My wife’s car is 8 years old, it’s to the point where I get nervous when something shimmies or I hear unfamiliar sounds.

    I’m self employed, some clients are Doctor’s, pharmaceutical workers,, some are retired on Social Sec & Medicare, some work for defense contractors…almost every customer I can think of benefits directly & indirectly from current government outlays.

    I will not be replacing my wife”s car this year, no way are we going to take on a new payment as long as I’m left to wonder if I’m going to see any further slump in business.

    I tip my mechanic well, he stays honest, it’s less expensive than a new car.

  15. Glen says:

    It’d be nice of some of those bankers getting million dollar bonuses would buy a few thousand cars and kitchen appliances to prop our numbers up, but they wont.

    The rest of us are pretty broke, and no longer have any desire to buy on credit. I expect we will not be replacing cars or appliances as often as per rd’s comment.

    But if Ben could arrange to drop money on real Americans rather than bankers, I would expect a more positive trend.

  16. wally says:

    You could title the same chart “Stuff Now Lasts Longer”.
    What would make the chart more informative is a long term line showing whether the average working life of these goods has changed over time; perhaps the longevity is just following a long term trend line… or perhaps we are now deviating from the mean.

  17. wally says:

    You could title the same chart “Stuff Now Lasts Longer”.
    What would make the chart more informative is a long term line showing whether the average working life of these goods has changed over time; perhaps the longevity is just following a long term trend line… or perhaps we are now deviating from the mean.

  18. King Kong says:

    The automobile data in the graph looks wrong. I have heard this issue brought up by auto industry experts on Bloomberg a couple of times, and I have read it a few times elsewhere. Every time I have heard this discussed the average age of cars on US roads is in the neighborhood of 10 years. The first time I heard the number it as 9+, and most recently >10. A quick internet search shows people talking about 11+ now for passenger cars. This is way out of line with the 4.1 in the above graph.

    I wonder if their data was actually how often on average a person buys a car. That number would be closer 4.1.

  19. ToNYC says:

    “America’s Cars and Appliances Are Getting Old”

    another way of saying “….Are not Getting Sold”

    The math of planned obsolescence led to the natural arbitrage of 1st year depreciation by the 99% who no longer get a taste of the growth but rather, the first taste of the exponential nature of debt on emerging demand with no cash on hand.

  20. willid3 says:

    many of those who are in the car industry have noticed one thing about used cars. the price of them have not been going down like they used to. and getting a reasonable recent used car is getting harder. mostly because without a source of new cars displacing them they get to be more expensive. for a while there they were getting be really really close to the price of a new one. most of that was crash in the car market from a few years ago (consider that we went from selling 16 million new cars to making to back to 14 million after 4 years of recovery). and almost all o of the new cars are built much better than ever before (thanks to the Japanese quality fixation). and you will notice that in major appliances (refrigerators, etc) have a pretty long life span now too.
    a lot of recent research indicates that the majority of car buyers were baby boomers. even cars that were really intended for younger audiences were being bought by baby boomers, not the next generations.

    i suspect that the main reason for this is that the next generations just dont have the incomes to support buying long term goods any more. they will but things like computers etc because they do change quickly. and compare the prices of computers and cars, you notice that computers are a lot cheaper.

    the other thing that leads me to believe that its the lack of income is that a few decades back some one making minimum wage could save to buy a mustang or equivalent car. today that would be a long term saving project going on for almost a decade.

  21. SecondLook says:

    One consequence of the automotive fleet being older is that average fuel efficiency has lagged. That is the major reason why while the price of gasoline has tripled over the last 10 years or so, the average MPG of the fleet has only improved by less than 10% – an enormous contrast the period between 1975-1985 where essentially passenger car efficiency doubled, and light-truck, about 80% (light truck category includes pickups, vans, and SUV’s).

    There seems to be two factors at work, besides that cars are built to last longer: Stagnant incomes make switching to newer, more efficient cars more difficult, and that, especially for devotees of light truck chassis vehicles (more than half the total automotive fleet), there is a remarkable amount of price insensitivity when it comes to the cost of fuel – despite all the grousing.

    The good news is that, simply by attrition, the average fleet MPG is going to improve more over the next decade than the best. The new generation of cars and trucks are significantly more gas stingy.

    The bad new is that the tab for gasoline for households isn’t likely to decline very much, as inevitably increasing prices are going to offset much if not most of the higher mileage.

  22. rd says:

    ToNYC

    I was scratching my head as well on the lifespan of the cars but I assumed that what they were really measuring was the period that the first owner would hold onto a new car which is the real driver for the new car market. The same is not really the case for appliances or other durable goods that tend to get scrapped instead of resold as used.

  23. contrabandista13 says:

    I just can’t do it… I just can’t get rid of my 1990, red, Saab 900s turbo convertible…. The odometer has been stuck at 117k for years and years and it still runs like a top…. It’s not that I can’t afford any car I want, I just can’t do it….! The top leaks, sometimes it makes a weird noise, my girlfriend hates it, my mother hates it, I have one key for the door, one for the glove compartment, one for the trunk and one for the ignition, where do you draw the line….? What they don’t know is that this beautiful, very hip and cool looking young woman, walked up to me, a couple of years ago, while I was parking it downtown and said “cool car, I love it….” It’s a keeper… :-)

  24. JimRino says:

    Buying a Prius, or Honda Insight Hybrid, and keeping it for 10 years, is a great way to save a fortune in gas bills.
    Secondly, if you can afford Solar Panels, then a Volt or Leaf can also drastically reduce your cost of transportation.

    But, most Americans have been out of school a long time, and simply won’t do simple math.

  25. ToNYC says:

    ” What they don’t know is that this beautiful, very hip and cool looking young woman, walked up to me, a couple of years ago, while I was parking it downtown and said “cool car, I love it….” It’s a keeper… :-)”

    In the Spirit of the season, I hope some of the Saab rubs off on you.

  26. markie says:

    One large omission from this analysis is that the pooulation is ageing, and this crowd may not feel the need to buy new stuff.

    My wife owns a 2010 Lexus IS 250 and we are planning to keep it for at least another four years. I drive a 2010 VW Jetta TDI, and plan to keep it for three more years.

    Our major applicance are probably 6 to 8 years old and we won’t replace these things until something breaks or until some super efficient configuration comes to market.

    It is not about having $$, but rater a question of; Whats the Point (in buying something new, just cause it’s over 4 years old)?

    M

  27. yuan says:

    I will never buy another car. Apart from the enormous savings (depreciation, insurance, parking), getting rid of the metal “cage” was the single best health and lifestyle decision I have ever made. And I am not alone — millions of americans have come to the same conclusion. The american love affair with the automobile is, thankfully, coming to an end.

  28. jtill says:

    This is just wishful thinking. There is no positive sign to this data. Let’s just say the fact: Lots of people are deciding they can not afford to buy a car, and this trend is continuing. That’s not positive.

    ~~~

    BR: Not positive, but the opposite — so negative, as to be “potentially bullish.” Huge difference!

  29. VennData says:

    Angry White goods demand they be taken care of, protected, and have their finance payments cut.

  30. scottinnj says:

    WRT to Cars, Calculated Risk keeps track of Vehicle Miles driven as reported by the DOT:

    http://www.calculatedriskblog.com/2012/12/dot-vehicle-miles-driven-increased-03.html

    Cumulative Miles Drivent through OCT YTD are up only 0.6% from last year and still below peak levels.

    If people are driving less they should be able to keep cars longer. Also as noted by CR (a) older people drive less, so our aging population is a factor and (b) younger people are driving much less – even after you factor in higher unemployment for younger people.

  31. Anastasio says:

    My “youngest” vehicle is a 1990 Honda CRX Si. Even at almost 250,000 miles it still gets over 40 MPG.
    If it died I would consider getting a refurbed motor before I’d buy something new.

    You know your car is old when the reason it wont start is because the rubber stopper that engages the safety switch on the clutch pedal broke apart and fell off. Or, you are due for your 4th timing belt!

  32. key-bit says:

    This is the same thing they were saying about heavy duty trucks when I worked at Navistar (international truck & engine) years ago. The fleet on the road is the oldest in history because the trucks built now last longer than ever and it has become cost effective to repair older vehicles than buy new ones.

  33. SecondLook says:

    Keep in mind, when it comes to large appliances, one of the major factors is home purchases. New homes, of course – whether it’s the builder pre-installing them for a turnkey development, or the home buyer getting new appliances instead of moving old ones from a previous home. The latter very common. Similarly for used homes; either the seller buys to make the property more attractive, or the purchaser to update.

    If it were simply a matter of a replacement cycle, sales of major appliances would very diminished. For example, the average refrigerator is estimated to last about 16 years, a gas range about 19.

    As for less driving miles, I’m not so sure, you have to quantify what kind of driving. Stop and go urban driving usually is harder on a car than highway (assuming you aren’t driving in congestion often). A retired couple using their car mostly for short trip around town may very find that their car is aging faster than the mileage would indicate. On the other hand, I can see a fairly large number of older household cutting back on the number of cars they have.

  34. Lord says:

    Those look really young to me. My car is 10 and I expect to keep it another 10 or more. My refrigerator was 27 when I replaced it not because it wasn’t working but I wanted something newer. The other appliances were 15 before replacement and my washer and dryer are currently 17. Maybe I will replace them before 20. I am currently adding a tv each 5 years for eventual replacement at 15.

  35. louis says:

    Vintage

  36. BigD173 says:

    The graph for the age of automobiles is at variance with other data on the subject. According to USA Today, reporting data produced by Polk, the average age of American vehicles is much higher than reported by Bloomberg and the Commerce Department. But the datasets agree in that both show a gradual increase in the age of vehicles.

    * http://content.usatoday.com/communities/driveon/post/2012/01/average-age-of-us-cars-up-again-in-2011-may-now-head-down/1

    So what if we have an aging fleet? Yes, eventually older vehicles will be replaced. But vehicle reliability has improved greatly over the years. Vehicles simply last longer; no wonder the average age of vehicles on the road has increased. I don’t see much of a “bullish” outcome here. In other words, I wouldn’t expect some kind of “mean reversion” to a lower average age.

    If anything, the trend toward keeping vehicles in service longer is likely to continue. Particularly as we drive less and less these days, and thus put less wear and tear on our cars and trucks: Working from home via the internet reduces commuting miles, and there is less of a need to go to stores when you can shop online.

  37. DonQuixote says:

    The charts sure are pretty but are useless. There is no data that supports the results unless you are in the 1% and replace these items because 1. you don’t like the color. 2. the oil light came on and you decide it’s time to change the car 3. The maid put too much detergent in the washer and you took that as an omen to get an IPod port on a new washing machine. 4. You are buying your 6th house and need new furniture.

  38. bear_in_mind says:

    Some additional anecdotes:

    Currently own two vehicles: an ’89 Toyota Xtra-Cab Pickup and ’11 Nissan Altima sedan. Bought both new, both 4-cyl engines, but we log precious few miles on either, preferring to use public transit 5+ days per week.

    While the Altima gets 36-40 mpg freeway with cruise control @ 60+/- mph, it only manages a miserable 23-24 mpg in the city. Since overall average mpg between the two is a toss-up, the Toyota gets more in-town usage.

    Thought I’d have scrapped the Toyota by now, but never imagined my wages would be locked in carbonite for 6-8 years while the expense of virtually EVERYTHING increased. While I could replace a fridge, range or flooring, at this stage I’ll make incremental repairs until they wear out.

    And I’m quite happy with my 46″ 1080p LCD widescreen bought Black Friday ’07 for $899.00. Just need it to last until Revision B/C version of 4K OLED’s hit the market in 2015.

    So, rather than continually lining the pockets of banks, cable companies, and retailers, I’ve become much more content putting 25-30pct of income into low-cost ETF’s in 457, Roth, and brokerage accounts. My only regret is that I didn’t embrace this approach 20 years ago!

  39. ConscienceofaConservative says:

    The car stat bothers me for two reasons.
    First as previously stated today cars last longer.
    Second leasing has grown in popularity and the auto only gets sold after the lease is up.

  40. Akula says:

    One contributor to long average automobile life is the spread of information enabled by the internet. The cost of accessing and uploading information has fallen precipitously. Sites like youtube and blogger coupled with cheap webcams have reduced the burden for Joe the mechanic to tell the world the best way to replace ball joints on a 1996 Civic. If you personally are not up to the task, then given the recession, there is a willing and able former construction worker, marketing his services on Craigslist who will do it for you in his garage. This is true for the DIY movement in general. If you have a problem with an appliance, the answer is a Google search, few minutes of browsing, and maybe a parts order away.

  41. Jim67545 says:

    I don’t have stats but from experience I know that during the financial crisis there was a major change in the sub-prime indirect auto finance market. Credit got much tighter and some sources either winked out of existence or removed themselves from that market segment. But I lack stats on the current situation and I’m out of the business now. If still in place the effect of this would be to direct low and ultralow income buyers as well as the millions with damaged credit into the cheapest segment of the market where they either can finance where they buy or pay cash. So, cars that might otherwise be scrapped live on.

    Many car dealers have a back row of “beaters” to meet the needs of this market segment. The economics here is that they sell for $2,000 a car they took in trade for $500. The terms are $500 down and 12 month’s payments of $150 plus interest (+/-.) Other factors might be the cost of auto insurance (the higher the premium the cheaper a car one can afford) and state vehicle inspections (more lenient now in sympathy to the economic situation?)

  42. cake walk says:

    interesting data, thanks for digging it up. comments about increased life-span of products and changing demography are probably valid (although I’m not sure what stories about neighbors oilchange practices can tell us). however, every data source cannot be adjusted for every bias. it’s not feasible to adjust for fewer young people setting up household, or incorporate product reliability statistics. doesn’t mean th numbers aren’t telling. but if ya still like anecdotes, I just bought a new car.

  43. bear_in_mind says:

    One other comment — there will naturally be an upgrade cycle, but will it be driven by another wave of borrowing or from median incomes breaking out of their secular decline?

  44. Moopheus says:

    My ’99 CRV is in the shop right now having the exhaust system repaired and some other things as well. And new tires. We bought it 5 years ago, paid cash. The amount we spend on maintainance over time is about 1/5th of what it would cost to buy a new car, and for the amount we drive (10K miles in 5 years), a new car just isn’t worth it. My dad was the kind of guy that wanted a new car every few years, couldn’t understand why I drove my Civic for ten years. The answer was simple: it kept running.

    We would like to get a new washing machine. The one we have now is a 14-year-old Kenmore, a new front-loader would save water, but the damn thing just refuses to die. Much of the furniture in our house isn’t new either, but we’re also the sort that go out of our way to buy “vintage” items when we can find something good.

  45. [...] America’s durable goods are getting old | Bloomberg Businessweek Charts the average age of various consumer durable goods (1960-2012): The aggregate age is at alltime highs, as are appliances (~5y) and automotives/cars (~4.2 years vs. 3.7 in 1990s & 2.6 in 1960s-80s). #Bullish [...]

  46. bear_in_mind says:

    FYI: I knew I’d seen research on declining numbers of younger drivers, and voila, today I ran across a publication that was quoting the University of Michigan study:

    Fewer American teens getting their driver’s licenses, U-M study finds
    http://www.freep.com/article/20120721/BUSINESS01/207210417/Fewer-American-teens-getting-their-driver-s-licenses-U-M-study-finds

    Fewer tech-savvy teens are driving
    “The licensing rate reduction persists all the way through people in their 30s, Sivak said, “Consequently, there are fewer potential buyers of vehicles in a major segment of the buying population,” he said.”
    http://articles.latimes.com/2012/aug/24/business/la-fi-autos-teen-drivers-20120824

    Teen drivers on the decline due to technology
    http://www.wjla.com/articles/2012/08/teen-drivers-on-the-decline-due-to-technology-study-says-79411.html